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Saturday, January 31, 2015

The outlook on this market remains bearish.
Price made serious bullish attempts, reaching the resistance line at 1.1400 and
then consolidated till the end of last week; all in the context of a downtrend.
This week, the downward trend can continue, enabling price to reach the support
lines at 1.1200 and 1.1150 respectively. Only a break above the resistance line
at 1.1450 could render the existing bearish outlook invalid.

USDCHF

Dominant bias: Bearish

The long-term bias on USD/CHF is bearish,
but in the near-term the bias is bullish. For the past two weeks, the market
has been going upwards in a slow and steady manner as, forecasted earlier. Should
this slow and steady bullish journey continue for the next few weeks, the
overall bias could turn bullish. However, occasional but transitory pullbacks
are expected in the journey to the upside.

GBPUSD

Dominant
bias: Bearish

On Cable, it can be seen that last week was
characterized by a serious battle between the bulls and the bears, which
resulted in serious swings in the market. Price reached a high of 1.5222 and a
low of 1.4987 last week. There is a distribution territory at 1.5200; plus an
accumulation territory at 1.5200. Further weakness can make Cable reach the
accumulation territory at 1.5000 again. Overall, the outlook is bearish and it
would remain so: unless the distribution territory at 1.5200 is breached to the
upside and price is able to remain above it.

USDJPY

Dominant bias: Bearish

There was no
much activity in this market last week; except occasional short-term upswings
and downswings in the market. This week, it is either the supply level at
119.00 is breached to the upside or the demand level at 117.00 is breached to
the downside. A breach of the former would result in a new lease of bullish energy,
and a break in the latter would result in a strong Bearish Confirmation Pattern
in the market. But right now, this is an equilibrium market.

EURJPY

Dominant bias: Bearish

Despite significant attempts from the bulls to push up the
price last week, the outlook in the market is bearish. From the demand zone at 130.50,
price went upwards, reaching the supply zone at 134.00. On Friday, January 29,
2015, price closed at 132.66, on a bearish note. The weakness in this cross is
still in place - only a break above the supply zone at 135.50 could really
endanger the extant bearish outlook.

This forecast is concluded with the quote below:

“Since the
market provides us with an infinite number of opportunities—and will continue
to do so as long as human nature remains what it is, only fill your bowl with
what you can carry on each trade.”– Dr. Ken Long

“To me, the freedom to be able to work when and where I
want to is even more important than the money. This freedom is, of course, easy
to attain by working as a trader.”- Ruediger Born

Daniel S. Loeb was born in December 18, 1961, in Santa
Monica, California, U.S.A. He was born
to Jewish parents. His father was a partner at a law firm, while his mother was
a historian. He went to the University of California, but graduated from
Columbia University, earning a degree in economics. He’d been fascinated by the
market at a very young age. For instance, he had a profit of $120,000 from his
stock market investment (while still at the University). However, the profit was
forfeited in another venture, which, needless to say, taught him a special
lesson.

From 1984 to 1987, he worked at Warburg Pincus. He worked as
a director at a record label; after which he worked as a risk arbitrage analyst
at Lafer Equity Investors. He worked at Jefferies LLC from 1991 to 1994. He
then worked as a specialist at Citigroup.

In 1995, he founded Third Point Partners LLC with $3,300,000
only. He reveals his feelings when starting at that time, and I quote him: “I
almost got stage fright the day before I started the fund. I had five or six
family members and a few friends and $340,000 of my own money, which was my
life savings from ten years working on Wall Street.”

Many years later, in the year 2013, he’s featured among the
40 wealthiest funds managers. This shows that his investment strategies have
been working for him. The portfolio
that’s being managed by his New York-based company is now worth
$14,000,000,000.

Dan has been famous for his letters, which he writes to
company executives, criticizing them for poor management decisions which are
against the interests of shareholders. Some of the letters have been effective
enough to cause changes in the companies’ executives. His tactics is to invest
in a company, increasing his stake considerably so that he can have his say in
the company. For example, he initiated an effective attempt to remove Scott
Thompson as chief executive officer at Yahoo!, replacing him with Marissa
Mayer.

As of April 2014, Dan Loeb himself is worth $2,200,000,000.
He’s married to Margaret Davidson Munzer. He likes to surf in the Caribbean and
Indonesia.

He’s involved in many programs that have to do with
philanthropy, education, human rights, politics, military, medical research,
industry, arts; either participating or donating generously. In return, he’s
been honored with awards.

Lessons:

These are some of the lessons you can learn from Dan:

The markets are a level
playing field. They don’t respect your place in the society. Yes, as Dan
puts it: “One's place in society' does not matter at all. We are a bunch
of scrappy guys from diverse backgrounds (Jewish, Muslim, Hindu etc.) who
enjoy outwitting pompous asses like yourself in financial markets
globally." Our ethnic or religious background doesn’t matter. What
matters is that we want to be successful market speculators that are
smarter than most others.

Dan loves to bet on the
markets that most others are afraid to invest in. He purchases stocks at
companies that look hopeless, and then effects radical changes in the
management of the companies and help them become profitable again. Dan cares about making money for his
investors, and he does everything possible to realize the goals. Our
stakeholders and investors’ interests should have preponderance over our
personal interests and motives.

You need to adopt trading
principles that work – even becoming philosophical about them. You need to
know that opportunities to make money arise from chaos and imbalance in
the markets. How do you then make money from that? Look for a good
strategy that has high probability setups.

Good trading principles
are also helpful in normal life. Traders think and act like traders. For
example, a good trader may translate the discipline and emotional control
she/he accomplishes in trading to life outside trading as well. Traders
ought to be diligent and hardworking, having the tenacity and grit,
enjoying what they do with great passion.

When we follow our
time-tested rules and lose, that’s better than when we violate our
time-tested rules and win. We don’t make mistake when we follow our rules
(even if we lose with them), we make mistakes only when we violate our
rules. About this Dan says that he wants people with good processes and
good outcomes, but he’d rather have somebody working for him who had a
good process and a bad outcome in a given year than somebody with a bad
process and a good outcome.

Timing is everything in
the markets. How often have you opened orders, only to see that the market
moves in your favor after you’ve been stopped out? Look for ways to
improve you timing. One method is to join an uptrend during a pullback;
and vice versa for a downtrend.

When you become really
good at trading, you’ll become good at pattern recognition and
identification of historical trends/cycles. The ability to do this comes
from experience you gain from looking at charts. Some wrongly call this
“instinct.”

Super trades aren’t
infallible. We can be sure that we’ll make mistakes, since we don’t have
answers to everything, nor are we perfect. We should bear this in mind
when we make losing trades. Yet, this shouldn’t deter us from being
profitable.

Leverage is good when used
judiciously, but very dangerous when used illogically. When you make a
profit of 20% per annum as a result of risking 0.5% of your account per trade,
and another person generates a profit of
40% or 60% per annum out of risking 1% or 1.5% per trade, do you
think the other person is a smarter trader? The answer is NO! It’s just
that the other person has achieved higher returns by betting bigger per
trade, thus increasing her/his risk of higher drawdowns. With that, the
person can also suffer about 50% or 70% drawdowns. Therefore the best
trading method is to look for ways to optimize profits with as little
drawdowns as possible. Dan has made big improvements in this area since
2008.

Traders and investors
should look for opportunities the world over. The American markets are
still the biggest, most important, and most profitable (with arguably the
best companies and capital markets), but there are increasing
opportunities in other countries like India, China, Brazil, etc. You miss
wonderful opportunities to make profits if you ignore these countries.

For you to make money, you
must be willing to take risk. There is no way to tap the riches in the markets
unless you become a trader or investor. People go into trading because
they think they can become rich quickly, but it’s rather good to be
realistic than idealistic. A healthy appetite for risk involves effective
risk management.

Conclusion: We mayn’t
fully understand all the forces behind market actions. For example, pullbacks
in weak markets may be stronger than pullbacks in strong markets, but we can
make money in these kinds of price actions.
When gaining more and more experience as speculators, we become more
effective at controlling risk… and our rewards also increase accordingly.
Please see the quote below. Super traders aren’t infallible gods that predict
the markets accurately. They’re rather experts who’re good at taking
opportunities. True, trading principles that work are timeless and they don’t
change with changing market conditions and the time.

This article is ended by a quote from Dan:

“I have never professed to have a crystal ball that
forecasts market direction… The secret to our success is congruence between our
investment style and my personal investment style and philosophy, the
fundamental elements of which have remained constant over almost 18 years.”

Wednesday, January 28, 2015

NB: Every trade
could be entered with a stop loss of 100 pips and a take profit of 200 pips.
Only 0.5% is risked per trade. With an account balance of $20,000, a position
size of 0.1 would be used. The breakeven stop is set after about 70-pip profit
is made. A trailing stop of 100 pips is set after over 170 pips have been
gained.

Recent performances

December 2013 – December 2014
= 12.0%

Disclaimer: Trading signals are provided for information purposes
only and shouldn’t be construed as trading advice.

Tuesday, January 27, 2015

The price movement on Yahoo! is nearly similar to
the price movement on Ebay (NASDAQ:EBAY). The price of the shares was bullish for
the most part of the year 2014 and it consolidated around the end of that year.
In January 2015, there was a transient plunge in the market, which was ended abruptly
as the bulls continue to hold on to their determination.

Since the bulls continue to defend their determination
to push the price upwards, the price has gone above the EMA 21, while the
Williams’ Percentage Range period 21 is around the overbought region. This
shows an ongoing stamina in the market. Generally, the market can move upwards
by over 1000 points this year, reaching the distribution territory at 60.00 (the
price may even breach the distribution territory to the upside).

This forecast is ended by the quote below:

“Trading
is a business and you have to invest much time to become a good trader. If you
are not ready to do so, you have to trust your money to someone who is already successful.”– Julian Komar

Yahoo stock (NASDAG:YHOO) is a ‘buy’ for this year.
The stock was bullish last year, though it consolidated during the last month
of the last year. The stock traded downwards a little bit this month, but there
has now been a clean upward breakout – which could signify the beginning of a
long-term bullish run.

In the chart, the ADX period 14 is currently not
above the level 20, meaning a lack of momentum in the market. The DM+ and the
DM- do not give a clear direction (which means that one is not significantly
above the other). The MACD, default parameters, has both the histogram and the
signal lines below the zero line. This is a result of the recent bearish attempt
in the market, but the indicators would soon factor the present price actions
in.

Short trades are not advisable here. In addition,
one may want to stay aside until the price goes above the resistance level at
50.50, then one can buy Yahoo! stock. Yes, momentum will eventually return to
the market and it is supposed to favor the bulls.

This forecast is ended by the quote below:

“Often
traders lose sight of their goals of capital preservation and long term
augmentation.”– Julian
Komar

Sunday, January 25, 2015

The EUR/USD is now one of the
weakest of the popular pairs and crosses. Since January 2, 2015, the price has
fallen by roughly 900 pips. There was a massive drop in the market last week,
enabling the price to drop below the support line at 1.1150. Although the price
bounced upwards after that, the support line would be breached soon.

EUR/USD: The EUR/USD is now one of the weakest of the popular pairs
and crosses. Since January 2, 2015, the price has fallen by roughly 900 pips.
There was a massive drop in the market last week, enabling the price to drop
below the support line at 1.1150. Although the price bounced upwards after
that, the support line would be breached soon.

USD/CHF: The outlook on this special market remains unchanged. The
bias on this currently abnormal market is bearish but it is expected that the
bullish correction would continue gradually in spite of occasional large
bearish corrections. The USD/CHF would, therefore, move upwards by at least,
500 pips this week. The upwards movement
would, however, be slow and gradual.

GBP/USD: One nice thing about the Cable is that it is now going in
a clean positive correlation with the EUR/USD. The two pairs tend to go in
positive correlation with each other – an established habit. The Cable and the
EUR/USD are both dropping, but the drop in the latter is more significant than
the drop in the former. On the Cable, further drop is expected this week.

USD/JPY: The situation on the USD/JPY is a kind of dicey right now;
but it is more probable that the pair would go further south, as a result of
perceived strength in the JPY. This market can reach the demand level at 117.00
soon.

EUR/JPY: This is one of the
weakest among the JPY pairs – largely because of the strong weakness in the EUR
itself. On Friday, January 23, 2015, the price closed on a bearish note. More
southerly movement is expected this week.

Saturday, January 24, 2015

The EUR is now one of the weakest
currencies among popular currencies, having dropped by roughly 900 pips since
the beginning of this year. The support line at 1.1150 has already been tested
and it would be tested again (it can even be breached to the downside), as it
is supported by a vivid Bearish Confirmation Pattern in the market. The outlook
for this week is bearish – continuous selling pressure is expected and there is
a great possibility that EUR could reach parity with USD.

USDCHF

Dominant bias: Bearish

The bias on USDCHF remains unchanged. On
Friday, January 23, 2015, price closed at 0.8784. As EURUSD is weak, USDCHF
ought to be strong, and the strength would continue to come gradually in the
context of a bearish outlook. Price should continue to move upwards this week,
in a slow and steady manner.

GBPUSD

Dominant
bias: Bearish

One nice thing about Cable is that it is now going
in a clean positive correlation with EURUSD. The two pairs tend to go in
positive correlation with each other – an established habit. Cable and EURUSD
are both dropping, but the drop in the latter is more significant than the drop
in the former. On Cable, further drop is expected this week, which may be more
serious than the drop that was seen last week.

USDJPY

Dominant bias: Bearish

When compared
to the EURJPY, this pair did not move so much recently. Upswings are alternated
by downswings, though the bears are able to make their presence felt. Price may
be able to reach the demand level at 116.50, but there is possibility that the
bulls would end up dominating the market before the end of this week.

EURJPY

Dominant bias: Bearish

This currency trading instrument made some effort to rally
last week. From the beginning of that week, price went upwards by 200 pips,
reaching the supply zone at 137.50. However, further upwards movement was
rejected at that supply zone, and price dived steeply, reaching the demand zone
at 131.00. There is a negligible upward bounce in the market, which means
almost nothing when compared to the overall bias. Generally, this instrument
has dropped by over 1300 pips since the beginning of this year. Price may test
the demand zones at 131.00 and 130.00, but it would go further below only in
the face of continued weakness in the Euro, for there is a possibility that the
yen would become weak before the end of this month.

This forecast is concluded with the quote below:

“In my opinion
trading is the only way to protect and increase your capital in the long term.
But I am not saying that you need to become a day trader. There are many and
also long term ways to trade.”– Julian Komar

Wednesday, January 21, 2015

FTSE 100 stock (FTSE:UKX) is currently an upbeat
market and this may be the beginning of a long-term bullish outlook. The last
year was characterized by large pullbacks, followed by large upswings.

In the chart, 4 EMAs are used and they are EMAs 10,
20, 50 and 200. The color that stands for each EMA is shown on the top left
part of the chart. Now, we want to lay emphasis on what is happening right now
in the market.

It can be seen that there has been a Golden Cross here
(which occurred as the price crosses the EMA 200 to the upside). This Golden
Cross sums up the outlook for this year: bullish. Movements in the market give
an opportunity to stake and make gains. This helps when things are put in
proper perspective.

This forecast is ended by the quote below:

“At some important key points, other traders have helped
me a lot to develop a proper understanding.” – Jens Rabe

IBM shares (NYSE:IBM) are weak. The downtrend has been going
on since last year. In the past several months, the price consolidated tightly,
and now it has broken further downwards, poised to move further south.

The price has broken out below the lower Trendline, as the
RSI period 14 also goes below the level 50. This indicates a ‘sell’ signal –
just in solidarity with the dominant bias. It is expected that the market would
continue moving south until it reaches the accumulation territories at 140.00
and 130.00.

The reality is that a confirmed bias might hold out longer
than most speculators think. Going against the established bias simply because
the market looks overextended is not the best. When one minds the risk taken
with each position, one would be able to control negativity significantly.

This forecast is ended by the quote below:

“The most important thing is that you have some sort of
advantage over the other market participants. In my case, it is a statistical
advantage.” – Jens Rabe

Tuesday, January 20, 2015

NB: Every trade could
be entered with a stop loss of 100 pips and a take profit of 200 pips. Only
0.5% is risked per trade. With an account balance of $20,000, a position size
of 0.1 would be used. The breakeven stop is set after about 70-pip profit is
made. A trailing stop of 100 pips is set after over 170 pips have been gained.

*My long-term outlook on CHFJPY is
bearish

Recent performances

December 2013 – December 2014 = 12.0%

Disclaimer: Trading signals are provided for information
purposes only and shouldn’t be construed as trading advice.

Monday, January 19, 2015

“It’s futile to call the trade before it happens. One can
never know beforehand if a trade is

going to be a day trade, a short term trade of days or
weeks or a long term trade of weeks up to months. Every trade develops from the
embryonic stage of the smallest form on the smallest time scale.”– Dirk Vandycke

How It Started

On September 2011, the Swiss National Bank (SNB) made a
decision to put a peg at the 1.2000 on EUR/CHF. They did so because they wanted
to stabilize the export industry and the whole economy. It meant that EUR
wasn’t allowed to reach parity with CHF, unlike other CHF pairs. That previous
support level was referred to as a great floor, and the SNB would keep on
purchasing vast amounts of Euros to preclude it from depreciating against Swiss
Francs.

In the year 2011, EURCHF was below the level 1.2000. In
fact, EURCHF plummeted by more than 2800 pips that year, reaching a low of
1.0069. After the peg was effected, the cross jumped upwards above the level
1.2000. In the year 2012, price became very weak, but it was unable to close
below the level at 1.2000. Any time price went below the level, it would jump
above the level again.

In the year 2013, price was able to trade upwards
noticeably, owing to the strength in the Euro. Price was able to move upwards
by over 500 pips, reaching a high of 1.2648. In the year 2014, price trended
downwards in a slow and steady manner until it reached the floor at 1.2000
again at the end of that year. Many saw this as a peerless opportunity to buy
EURCHF cross.

EURCHF then looked like ‘an unfair’ market in which
everybody could make money. It was like
a market in which everybody could harness huge gains, and certain lovers of
risk might be willing to risk a huge part of their portfolios. Many thought it
was stupid go short on EURCHF, since there was a “guarantee” that the cross
would eventually go up, just like interest rates in some developed countries, which
some thought had nowhere to go expect upwards. Some didn’t even know that
interest rate could be made negative. The
only thing that could render the scenario useless was when the peg was removed
– which the SNB was unwilling to do then.

January 15, 2015 –
Magnificent Earthquakes in theMarkets

Nevertheless, it was getting more and more expensive for the
SNB to defend the peg. A central bank would need a very deep pocket to keep on
doing that for a long time. The SNB reserves increased to a record high and the
outlook on Euro was becoming more and more gloomy. It was clear that holding onto
that floor was illogical. On January 15, 2015, the SNB suddenly removed the peg
and decreased the interest rate further into the negative territory. The trading
world was taken by surprise. Some traders made huge profits and losses. Only
those who didn’t trade CHF pairs weren’t seriously affected.

USDCHF dropped by 2800 pips.

EURCHF dropped by 3300 pips

GBPCHF dropped by 4300 pips

CADCHF dropped by 1500 pips

CHFJPY rallied by 6900 pips

NZDCHF dropped by 1500 pips

AUDCHF dropped by 1500 pips

These moves were unprecedented! A daily candle was as long
as a human arm! While it is normal for a pair/cross to experience a directional
movement of thousands of pips within several days, weeks or months, it’s not
normal for a pair/cross to move so much in a single day. The market is like a
rubber band, if it moves to far in one direction, you should expect it to snap
back in the opposite direction. Thus there were significant corrections on that
day alone.

Neither the SNB nor the markets can be blamed for this: a
central bank has the right to do what they want with their currency. In
addition, the markets conditions that brought losses to some are the same
conditions that brought profits for some. Good risk managers suffer negligible
loss when caught on the wrong side of the market, and they make commendable
gains when they’re caught on the right side.

Lessons for
Gamblers

I know someone who made a profit of 7,000,000 Euros in 2
hours. Someone who funded his account with 100 dollars and was using 0.1 lots
made 2600% returns in a single day. Someone who funded his account with 1000
dollars and traded with 0.5 lots came home from work and saw an account balance
of over 10,000 dollars. Many brokers now need to pay their clients gargantuan
amounts of profits.

If you made huge profits here, like several hundreds of
percentage of profits, it was only a matter of luck; and no trader can
experience permanent success based on pure luck. Good traders are those who survive adverse
market conditions, not only those who make big money from the markets.

On the other hand, many traders received margin calls or
lost most part of their portfolios. Imagine someone using 60.0 lots on a
1,000,000 pounds account. Needless to say, the money was lost immediately.
Certain brokers were badly affected (though most brokers were unaffected). I
deeply empathize with those who were badly affected.

I was also affected, for I was holding two long positions on
EURCHF and NZDCHF, but I suffered only -1.2% losses in total. My loss should be
only 1% on the 2 trades, but you know, slippage. Stops will forever be our life
insurance policy. If you follow the advice of those who don’t use stops, your
losses can’t be their responsibility.

Do you remember the May 6, 2010 Flash Crash? Do you remember
the earthquake in Japan, which occurred on March 11, 2011, plus the nuclear
disaster that followed? Do you know the effects they had on the markets? Do you
know how traders were affected and what happened following massive drops in prices?
These should serve as lessons against the Gambler’s Fallacy. Unfortunately,
many people seemed not to learn their lesson.

Overconfidence is definitely not a good thing.

As you can see, whether you trade with fundamental or
technical analysis or combine both, you don’t know what the market will do next
and you can’t be always right. Even those who prognosticated that the peg would
be removed didn’t know when exactly it would be. When things go wrong, only risk control will
help you, not your knowledge of technical or fundamental things. It’s better to
focus on what we can control – our winners and losers.

It’s not the best to sacrifice permanent success for
short-term greed. Those who appear stupid by doing the right things would
eventually be proven to be prudent.

When I recommend the risk of 0.5% per trade, most people
ignore me. In fact, you’d hardly see someone using only 0.1 lots on a $20,000
dollars account or 0.5 lots on a $100,000 dollars account. They think it’s too
illogical and conservative, playing down my warning that the safety of our
portfolios are more important that the profits we want to make. Large losses
are extremely difficult to recover and therefore, they should be avoided at all
costs. The most guaranteed setup in the
world can’t make me risk more than 0.5% on any of my future trade.

I’ve been an advocate
of permanent success, but it can’t be achieved by those who use large position
sizes.Leverage isn’t a problem, but an irrational use of leverage is
the problem. Leverage is a boon to risk managers who know how to control their
losses and profits.

Next Directions on
CHF Pairs

The SNB might still try to keep the CHF undervalued and they
may explore another means of doing so. Opportunities to go long arose when
prices decline towards ridiculously abnormal levels. These kinds of movements
in a single day are extremely spectacular, and therefore, current CHF pairs’
prices are bound to get corrected in the long run and things would return to
normal in a matter of weeks. For instance, when USDCHF dropped like a stone,
EURUSD ought to spike skywards, since they are negatively correlated in a
normal condition. The latter was not affected, and both pairs cannot remain
bearish for a long time (and Greenback is strong in its own right). USDCHF
would, therefore, move upwards by at least, 500 pips this month or next month.

These kinds of markets offer unique opportunities to assume
contrarian positions. At the end of January 15, 2015, I went long on EURCHF,
USDCHF, AUDCHF, NZDCHF, GBPCHF and CADCHF (selling short CHFJPY), using a
position size of 0.1 lots for each $20,000. I target 500 pips on each trade.
I’d hold these long positions for weeks or months – until all the targets are
met. I won’t make use of breakeven or trailing stops this time around because I
want to create enough leeway for the high volatility in the markets, while I
enjoy the free ride.

The bearish pair and crosses cannot remain bearish forever.
The CHF markets are expected to correct themselves gradually until things
become normal. As some bask in the euphoria of windfall and others lick their wound,
we shouldn’t forget the lessons we learn from the CHF pairs volatility, which
were a blessing and a curse.

This piece is ended with the quote below:

“If you trade at a size that’s nearly meaningless, there
will be very little emotions involved. However, if you are taking on big risks
you will make emotional mistakes.”–
Dave Landry

Sunday, January 18, 2015

The current bullish effort on the USD/JPY is seen as another
opportunity to sell short. The supply levels at 118.00 and 118.50 may defend
the bearish outlook while there is a possibility that the demand levels at
116.50 and 116.00 could be tested again.

EUR/USD: This
pair trended downwards by more than 300 pips last week and therefore, the
current upwards bounce is shallow and it pales into insignificance when
compared to the existing bearish outlook. The support lines at 1.1500 and
1.1450 could be challenged again and they can be overcome.

USD/CHF: When the
USDCHF dropped like a stone last week, the EURUSD ought to spike skywards,
since they are negatively correlated in a normal condition. The latter was not
affected, and both pairs cannot remain bearish for a long time (and the USD is
strong in its own right). USDCHF would, therefore, move upwards by at least,
500 pips this week.

GBP/USD: This
currency trading instrument first went upwards by 150 pips and later dropped by
over 100 pips. The overall outlook is southwards and the accumulation
territories at 1.5100 and 1.5050 could be tried this week.

USD/JPY: The
current bullish effort on the USD/JPY is seen as another opportunity to sell
short. The supply levels at 118.00 and 118.50 may defend the bearish outlook
while there is a possibility that the demand levels at 116.50 and 116.00 could
be tested again.

EUR/JPY: Since the beginning of this year, this cross
has dropped by around 1000 pips (it dropped by around 400 pips last week). The
price closed below the supply zones at 136.50, and it is expected to go further
downwards, reaching the demand zones at 134.50 eventually. The only thing that
can change the bearish outlook this week is the event in which the JPY is
weakened.

Saturday, January 17, 2015

This pair moved downwards by over 300 pips
last week, reaching a low of 1.1459. There is a strong Bearish Confirmation
Pattern in the market and price may test the support line at 1.1450, even if
there would be an upwards bounce after that. On the other hand, there is a
possibility that the resistance lines at 1.1700 and 1.1750 could be challenged.

USDCHF

Dominant bias: Bearish

This is now an abnormal market, since the
Swiss National Bank (SNB) removed the peg on EURCHF and cut their interest
rate, which is currently negative. This happened on January 15, 2015 and it has
had extremely huge impact on all CHF pairs, including USDCHF. For example,
CHFJPY rose by over 2400 pips, reaching a high of 138.97; and USDCHF nosedived
by over 2800 pips, reaching a low of 0.7309. This happened in one day, plus similar
unusual volatility happened on all CHF pairs. These kinds of movements in a
single day are extremely spectacular, and therefore, current CHF pairs’ prices
are bound to get corrected in the long run and things would return to normal in
a matter of weeks. For instance, when USDCHF dropped like a stone, EURUSD ought
to spike skywards, since they are negatively correlated in a normal condition. The
latter was not affected, and both pairs cannot remain bearish for a long time (and
Greenback is strong in its own right). USDCHF would, therefore, move upwards by
at least, 500 pips this week.

GBPUSD

Dominant
bias: Bearish

Cable
made noticeable effort to go bullish last week, but further bullish effort was
halted at the distribution territory of 1.5250, and since then, there has been
a bearish retracement in the market. On Friday, January 16, 2015, price closed
around the distribution territory at 1.5150. More bearish movement is expected
this week; the price could reach the accumulation territories at 1.5100 and
1.5050.

USDJPY

Dominant bias: Bearish

The general
outlook on this currency trading instrument is weak – though price is making
some effort to go upwards in a context of the downtrend. The demand levels at
116.50 and 116.00\ could be tested this week (whereas the same demand levels
could defend further southerly thrust). Bullish effort could enable price to
test the supply levels at 118.00 and 118.50.

EURJPY

Dominant bias: Bearish

This cross dropped by over 400 pips last week, closing at
135.97 on Friday. Generally, it has dropped by over 1000 pips since the
beginning of this year. The current shallow rally pales into insignificance
when compared to the overall bias – bearish.
The only thing that can change the situation is the weakening of the
Yen, which could happen this week or next.

This forecast is concluded with the quote below:

“Trading wasn’t
the hardest thing for me to learn. The hardest thing to learn by far was how to
let go of the old patterns that had stopped serving me.”- Mercedes Oestermann
van Essen

Thursday, January 15, 2015

NB: Every trade
could be entered with a stop loss of 200 pips and a take profit of 400 pips.
Only 1% is risked per trade. With an account balance of $20,000, a position
size of 0.1 would be used (0.01 lots for each $2,000). The breakeven stop is
set after about 150-pip profit is made. A trailing stop of 200 pips is set
after over 350 pips have been gained.

Disclaimer: Trading signals are provided for information purposes
only and shouldn’t be construed as trading advice.

Wednesday, January 14, 2015

The RBS shares (LSE:RBS) are currently in a
precarious bullish outlook. Large dips in the price have been followed by
further northward rallies, and the current dip may also end up allowing more
northward trend.

Although the EMA 21 is now sloping upwards, the
price is currently below it. The Williams’ % Range period 20 has also
fluctuated close to the oversold territory, meaning the bears are making serious
attempts to push the price towards the south. Since the current price action
seems to be a fertile ground for the bears, they want to flex their muscles.
The butterfly is clothed in beauty, and as a result of that it begins to
challenge the thorn. The demand level at 340 should be an impediment to further
downwards movement, because the overall trend could turn bearish in the event
that the demand level fails to frustrate the effort of the bears.

On Royal Bank of Scotland, the outlook is bearish in
the short-term but bullish in the long-term. The demand level at 340 should
frustrate the effort of the bears and the price could go upwards towards the
supply levels at 500 and 600 respectively.

Google stock (NASDAQ:GOOG) is a bear market and that
bearishness is expected to continue for most part of this year. There would be
some transitory rallies along the way, which would pave the way for more
southerly journey.

In the chart, the ADX period 14 is around the level 30,
meaning that the current bearish momentum is strong. The DM- is above the DM+, showing
the bears’ hegemony. The MACD default parameters have both its histogram and
signal lines above the zero line – a bearish signal. There is generally a
Bearish Confirmation Pattern in the market and long trades are illogical.

Generally, the price may eventually reach the support levels
at 475 and 455.

Tuesday, January 13, 2015

It’s known that the broker makes money from spreads and/or
commissions on their clients’ trading activities, but what about swaps? I’ve
seen that swaps are sometimes positive or negative, having positive or negative
effects on the trader’s portfolios. But… who really benefits, or get affected
by swaps, the trader, the broker or the liquidity provider? An answer would be
appreciated.

Monday, January 12, 2015

NB: Every trade
could be entered with a stop loss of 100 pips and a take profit of 200 pips.
Only 0.5% is risked per trade. With an account balance of $20,000, a position
size of 0.1 would be used. The breakeven stop is set after about 70-pip profit
is made. A trailing stop of 100 pips is set after over 170 pips have been
gained.

Recent performances

December 2013 – December 2014
= 12%

Disclaimer: Trading signals are provided for information purposes
only and shouldn’t be construed as trading advice.

Sunday, January 11, 2015

The USD/CHF tested the
resistance level at 1.0200 vigorously, but it was unable to break it to the
upside. There is now a slight dip in the market, but with further strength in
the USD, the resistance level could be breached to the upside. On the other
hand, there is a possibility that the price may test the support lines at
1.0100 and 1.0050 this week.

EUR/USD: This pair trended downwards last week, going below the
support line at 1.1800, but unable to close below that line. There is now a
slight upwards bounce in the market, which could be the beginning of a
medium-term buying pressure in the market. The resistance line at 1.1950 could
be challenged.

USD/CHF: The USD/CHF tested the resistance level at 1.0200
vigorously, but it was unable to break it to the upside. There is now a slight
dip in the market, but with further strength in the USD, the resistance level
could be breached to the upside. On the other hand, there is a possibility that
the price may test the support lines at 1.0100 and 1.0050 this week.

GBP/USD: The GBP/USD trended further downwards by roughly 250 pips
last week, challenging the accumulation territory at 1.5050. More downwards
movement was halted at this point, and the price bounced upwards, going above
the accumulation territory at 1.5150. The accumulation territory at 1.5050 can
now defend the market against a movement that could go below it.

USD/JPY: This currency trading instrument closed at 118.45 on
Friday, January 9, 2015, on a bearish note. The market has been volatile
recently - moving in swings. The demand level at 118.00 could be breached to
the upside before the bulls come in to push the price upwards.

EUR/JPY: This cross moved
further downwards last week; which led to a stronger Bearish Confirmation
Pattern in the market. The cross moved downwards by around 350 pips last week
and it could move further downwards this week.

Saturday, January 10, 2015

EURUSD assumed its southward journey on
January 2, 2015, going further and further south in the following week. Price
went below the support line at 1.1800, and then consolidated until the end of
the week. There is now a slight rally, which could portend the start of buying
pressure when price crosses the resistance line at 1.1900 to the upside, going
towards another resistance line at 1.2000. The support lines at 1.1800 and
1.1700 remains a barrier to further southward movements.

USDCHF

Dominant bias: Bullish

Since USD reached parity with CHF, this
pair has moved further upwards by 200 pips, enabling price to test the
resistance level at 1.0200. There is a minor pullback in the market, which
could mean the beginning a near-term bearish run, provided that the great
support level at 1.0000 is unable to contain more bearish correction. On the
other hand, a break above the resistance line at 1.0200 could mean the
continuation of the existing bias.

GBPUSD

Dominant
bias: Bearish

The
market is bearish, going downwards by over 200 pips on January 2, 2015, and
going further downwards by over 200 pips last week. The accumulation territory
1.5050 was tested before the current upwards bounce in the market. The upwards
bounce has taken price above the accumulation territory at 1.5150. While it is
possible for price to reach the distribution territory at 1.5250, the
probability of pullbacks reaching the accumulation territory at 1.5050 again
exists.

USDJPY

Dominant
bias: Bearish

USD/JPY
remains volatile, with short-term victories of the bulls and the bears. In the
past few weeks, this pair has been unable to remains above the supply level at
120.50, and as a result of this, the near-term bias has become bearish. In the
face of the recent swings in the market, the demand levels at 118.00 and 117.50
could be tested. The supply levels at 120.00 and 120.50 should also act as
impediment to rallies in the market.

EURJPY

Dominant bias: Bearish

Since the beginning of this month, this current trading
instrument has moved south by more than 450 pips, which contributed to the
strong Bearish Confirmation Pattern in the market. On Friday, January 9, 2015,
price closed at 140.32, on a bearish note. Since it closed below the supply zone at
140.50, it may be easier for the demand zone at 139.50 or 139.00 to be tested,
although there could be a strong rally after that.

This forecast is concluded with the quote below:

“Realize that
there is no holy grail and that a simple approach with proper money management
can actually work.”– Dave Landry

Friday, January 9, 2015

“Anyone who has been
involved in the markets has been humbled and respects the fact that this is not
an easy game no matter how successful we have already been or how much
experience we have.”– Charles E. Kirk

About 4 years ago, Mr. Geoffrey* came to me and said he wanted to learn
Forex trading. I explained to him that training would take some months because
there were crucial aspects of this business that people tended to ignore and
we’d need to work on those areas.

The training began. Initially, Geoffrey showed interest, but as
time went on, he lost patience. He told me that since he knew how to buy, sell,
close trades and handle basic operations of trading platforms, he wouldn’t want
to waste time with further training. He confessed that he’d just purchased a semi-automated
trading software which would make him rich very quickly. He showed me the historical
results of the strategy as published by the vendors – 4000% returns in one
year!

I tried to caution him against greed, but he thought I was a
doubting Thomas who wanted to discourage him from speedy attainment of
financial freedom. I was too conservative for him. Geoffrey took a
high-interest loan of $5,000 and started trading with it, using that semi-automated
strategy. He constantly let me know how his trading was. I saw that he was
risking 20% per trade and I warned him against that, telling him that 1% risk
per trade would be OK instead.

“I want to pay my kids’ school fees,” he retorted.

He was able to pay the school fees that week. Even he made
additional $120,000 within the next 2 months, on that account, and therefore,
he was lucky enough to pay back the loan with the interest on it. His plan was
to raise the remaining balance to $1,000,000 before he withdrew everything. I
was jealous of his achievement, I began to feel like a fool with the so-called
trading beliefs I held on to.

Without mincing words, Dr. Woody Johnson says there are
traders who have good market knowledge, a good plan, and good money management
but fail to keep their commitments and follow-through with the plan. I discovered that Geoffrey didn’t use stops;
he preferred to run negative trades until they came back to entry prices. The
strategy he was using had stop loss recommendations included in it, but he
ignored those recommendations. I warned him against his failure to use stops.

“Come off it, man. Stops are for chickens.” He
rejoined.

I ceased giving him advice.

One day, he messaged me on Skype, asking me what went wrong
with British economy since the Cable was dropping like a stone. I replied that
I knew that kind of drop was normal, so I didn’t bother to know what caused it.
He said nothing in return.

At times, the markets may show sensitivity to fundamental
figures and move accordingly; at times, the markets may ignore the
fundamentals. After a few days the Cable was still dropping. He messaged me
again on Skype, asking me the question below.

Should I close the trade?

I didn’t know the trade he was talking about, neither did I advised him
to open the trade. So, why would I advise him to close the trade? He opened the
trade himself and he should be responsible for the outcome of the trade. His
position size was suicidal; plus his trade management technique was dangerous.
I didn’t respond to his question.

Later I began to empathize with Geoffrey. I was aware that something was
strong with his trading, so I decided to visit him. I met him yelling at his
hen.

“You unfortunate hen! You’ve been incubating your eggs for
over 40 days without hatching them. Your mates hatch theirs within 21 days, but
you’re here showcasing your uselessness. If you want to hatch your eggs, hatch
them quickly. If you’re not ready to hatch, get out of my sight!”

Geoffrey was extremely bitter as a result of the adverse
condition affecting his trading capital and he was talking it out on the poor
hen. He chased the hen away.

As I entered Geoffrey’s trading room, I saw that his account
was down by -$100,000. He’d previously raised it to +$180,000. He became
overconfident and began to risk 30% per trade (without stop loss). He’d a few
positions that were in favor of the Cable because his semi-automated strategy
generated a ‘buy’ signal. The rally that acted as the cause of the ‘buy’ signal
was a mere rally that trapped the bulls before the currency pair assumed a
significantly long-term downtrend.

As I was watching the chart, another fundamental figure
affecting the GBP was released. The effect aided the continuation of the
downtrend. The market, which had dropped by over 800 pips already, dropped by
another 150 pips. Geoffrey suffered.

I was unable to say anything – I felt very sorry for him.

Eventually, Geoffrey closed his positions. The new available
balance was less than $1,500. At least, he was able to avoid a margin call,
wasn’t he?

I won’t mention the consequences Geoffrey faced as a result
of his foolishness.

Like some long trades at the time, the bullish gains quickly evaporated.
However, while Geoffrey was badly affected, certain traders have learned how to
survive that kind of price action; they’ve even learned how to make money from
that.

This article is ended by this quote:

“As
dedicated as I became, it was not until I was able to both profit and protect
my gains that I considered myself a successful trader.”– Chris Ebert

Call it fate. Call it irony. Call it coincidence. Call it
whatever you want to call it, but on the day that I decide to catch up with
Gulf Keystone Petroleum (LSE:GKP), my esteemed colleague, Azeez Mustapha has
also published his Annual Trading Forecast on Gulf Keystone. But wait. We do
not have the same perspective – He is
bearish; I am bullish - and there are good reasons for that. Before I delve
into that, let me note that the GKP share price is up 1.91% to 66.75 as we near the end of the LSE day.

Why Azeez is Bearish
on GKP

It’s all in the perspective. Azeez takes a technical,
analytic approach. His bearishness is based on historical numbers and patterns
of the stock itself. In other words, if Pattern A exists and Pattern X has is
beginning to appear, the alignment of the earth and the sun will soon produce
an eclipse.

Now, I am not poking fun at or demeaning Azeez or his
approach in any way. I hold him in high respect both as an analyst and as a
person of integrity. The difficulty that I have with analysis of patterns to
predict the future is that it works well with universal natural laws and, in
industry, with process control. As I have said in the past, at the end of the
analysis, there is a reason why we say that past history is not necessarily an
indicator of future performance. I encourage you to read his article to see
what his analysis indicates.

Why I am Bullish on
GKP

My business background is largely in operations. I
understand and accept statistical analysis as a necessity for evaluating what
is happening and for indicating the need for potential corrective action. But I
have never used it to predict the future. There are just too many other very
real, and often unknown, factors that affect the future more than the past
does. For that reason, I prefer to assess a company’s, past, present and future
based on their “story.”

Here is a sampling of
key components of the GKP story:

GKP has a market cap of £586 million.

GKP operations are focused on Shaikan oil deposit in
Kurdistan, which has 12.5 billion barrels of oil in place.

Kurdistan and Iraq (of which Kurdistan is an independent
state) have major political conflicts that disrupt the shipment of Kurdish oil
to market and have severely delayed payments for oil that has been delivered.

Kurdistan is a military target of the Islamic State.

GKP has to truck its oil over rough and desolate terrain to
port in Turkey until a pipeline can be completed.

BUT . . .

GKP has consistently met its milestones and KPI, including
attaining its production of goal of 40,000 bopd on time, despite all of the
above.

GKP’s production and export sales have increased by almost
300% from January through December 2014.

On 29 December 2014, 354 trucks (a record number) carrying
58,000 gross barrels of crude left GKP’s facility in Shaikan headed for the
Turkish port. Also, as I reported in December, GKP received its first payment
for its exports, in the amount of $15 million USD. It is estimated that the
government still owes GKP $35 million for shipments from the first half of
2014. Estimates for the final six months of the year exceed $50 million.

Oil Barrel news described GKP as having “a risk profile that
continues to mean that it is not one for the fainthearted,” but also noted that
the company has “strong underlying fundamentals.” I see GKP as a company that
continues to be managed well in the face of adversity, and adversity is pretty
much what it has face in Shaikan all along.

Tuesday, January 6, 2015

Contrary to expectations, Gulf Keystone shares (LSE:GKP)
were weak throughout the last year. Price dived freely and upwards bounces
proffered great short-selling opportunities. The bearish outlook is valid for
this year: the upward bounces along the way should not be chased. A mouse that
tries to chase a cat is looking for trouble. A dog that tries to chase a wolf
is looking for trouble.

In the chart, 4 EMAs are used for the analysis, and
they are EMAs 10, 20, 50 and 200. The color that stands for each EMA is shown
on the top left side of the chart. All the EMAs support the current bearish
outlook. Unless price crosses the EMA 200 to the upside and closes above it,
the shares would continue to drop. In this kind of situation, one can look to
buy when price rallies into the EMA 20 or 50.

We would need to think of the attributes of super
traders who do not act as if they are gods. They do not showcase self-esteem,
and they take the preservation of their capital seriously, as a prerequisite
for the gains to be made. We thus want to trade when our entry criteria are
met.

This forecast is ended by the quote below:

“The best money managers in the world shoot for realistic
returns and do so with very low drawdowns. If you run money and consistently
make low double digit returns with small drawdowns, you’ll have all the money
you could ever want to manage.” – Dave Landry

Facebook stock (NASDAQ:FB) was bullish for most of
the last year, though the bears also showed their strength in some cases. Price
tried to move further upwards in December 2014, but this was rejected and
things turned bearish. This novel bearish outlook should not be belittled
because it may translate into a significant bearish run. So buyers should
beware. When two dogs are fighting over a bone, the fight cannot end until one
of them yields.

This month has been bearish so far. Price is now
below the upper Trendline, while the RSI period 14 is below the level 50. This
signifies the existing bearish momentum, and should price go below the lower
Trendline, it could be the beginning of a long-term bearish movement. When the
above technical conditions get fulfilled, the outlook for this year would be bearish.
Otherwise, the stock may go upwards.

We have gotten to find a way to remains calm when
other traders are behaving irrationally. It is not OK to try to trade when our
entry criteria are not met. That is why a good trading coach will be an added
advantage.

This forecast is ended by the quote below:

“One of the main reasons people have difficulty taking
risk is that they are afraid of the consequences of a potential loss. They
wonder what they would tell their spouse or their parents should they lose.
They wonder what they would need to do to make back the lost money.”– Joe Ross